What's the point of outsourcing?

* What's the value in outsourcing?

It is certainly possible for any internal IT organization to provide basic technology services and many custom applications for their business. Typical examples include e-mail, Web sites, and file services together with enterprise applications for core business functions. Vendors work to create applications that are easy to implement and require limited administration expertise or time to maintain, which means that many systems are far more easily administered and maintained than in the past. But, is this really the best answer for most organizations?

Even when considering relatively well-understood and "simple" applications such as e-mail, the modern realities of administering the software are far more challenging than one might expect.

From the complexities introduced by spam and security defenses to the proliferation of mail formats and multimedia attachments, administering a "simple" mail server isn't so simple any more. When considering the expertise needed to manage the system - including knowledge of patch and upgrade management - together with the impact that lack of expertise has on the overall productivity of the organization, it often makes sense to engage outside expertise.

That expertise may come in the form of a consultant, but more and more, it comes in the form of an outsourcing firm.

Why is that? What is the point of outsourcing? Simply put, outsourcing provides the advantages of applying deep expertise in a particular application area to the requirements of an organization that would otherwise be unable to create and maintain that expertise.

As technologies continue to mature and grow more complex, it makes sense that specialization is a natural result. It is difficult for organizations to grown that expertise internally, so they must either rely on vendors to create systems that can be managed with limited time and expertise, or rely on service providers to deliver the necessary knowledge.

As we've discussed in recent newsletters, the focus of services is value. In the case of deciding whether or not to outsource a given technology, the questions revolve around the value received for the costs incurred.

In our example of e-mail services, what are the necessary skills to maintain an effective e-mail infrastructure? How much time will it take to maintain those skills and to keep the e-mail systems in working order, including testing changes before they are placed into production? Would this investment make sense for the organization, or would it be better to use a service provider that could include all of these functions within the fixed cost of the service?

Similarly, when considering which technologies are best managed by external service providers, you could ask the same basic questions: Which technologies require specialized expertise that is best delivered by an external supplier? In which areas of your organization could the provider that offers similar services to multiple customers, provide economies-of-scale benefits?

These and similar questions are more effective than simply limiting the question to whether or not the organization could consider outsourcing.

As always, the fundamental questions focus on the value that can be provided for a given cost. However, in considering the costs, the expense of the ongoing education and technology upgrades must be integral components of the overall decision process. With all of the input, the choices become clear.

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